If you go into the Android Market, and click downloads in the menu, it gives you a list of all apps that you have downloaded. If an app has an update available, it will tell you there. Clicking it will take you through the steps to update it.
You can also set the Market to check occasionally and notify you when updates are available.
For stock, preloaded apps, like the gmail app, or messaging, I think the system automatically updates those.
So the answer is, that apps update through a mix of both, depending on how they're on the system.
Hope this helps!